Are lawyers the key to lowering office vacancy in downtown?

As the new Family Justice Center is under construction, and the second national Patent Office is set to move into to city hall, what will the effects be on the downtown office market? Understandably, due to the Family Justice Center combining several buildings together under one roof, office spaces will open up. But many of these buildings are slotted for redevelopment, including the Family Court building at 170 Park Avenue, which was just put up for sale. The brutalist cement building is ugly and outdated, and on a prime corner across from Adobe, near a several large hotels. On top of the location, the zoning allows for almost anything downtown related: residential, office, hotels, retail or a mixture of any of these.

Besides the soon-to-be former court buildings becoming available, a federal patent office is moving into the city. As soon as the announcement was made that the new patent office would be anchored in San Jose, commercial real estate agents immediately contacted patent lawyers firms in Washington DC and around the nation to see who would be needing satellite offices in San Jose. One person at city hall even said that the patent office could be the most significant draw for office space that downtown has ever seen. Partner that with a concentrated Family Justice Center, and the areas around St. James Square and city hall become a very interesting study in commercial real estate.

It estimated that the US has about 25,000 active patent and intellectual properties lawyers. Granted a majority of them will stay in Washington DC, but Silicon Valley has the most patent filings in the nation, with San Jose having over 7,000 submissions last year. Needless to say the patent business is one that will be growing substantially in San Jose, and downtown has everything to gain from it

So if these court building properties do get redeveloped (like the Terrain Court, which is planned to eventually become residential) that means demand for new office buildings may be in the picture in the next few years, something that was unthinkable only a few years ago. Currently, there are talks between the city and potential downtown tenants, that have one city official optimistic that office vacancy rates could end the year in single digits. That seems unlikely, since downtown has about 8 million sqft of office space, so for 10% vacancy absorption it would mean a collective 750,000 sqft. But with the Mercury News lease downtown, the trend has been positive with net absorption for the last year of 6% and holding at 19% vacancy overall.

So could lawyers be the profession that pushes the vacancy bubble out of downtown? It plausible. It may take time for the satellite offices to pop up throughout downtown, but having a patent office right outside Silicon Valley’s door doesn’t hurt. It could also mean increases in hotel occupancy as lawyers come into the city to submit filings. It could also increase patent litigation at the new Justice Center as well, who knows. All in all, it seems to be a net positive for San Jose and continued momentum for downtown that is seeing an improving reputation as the urban center of the South Bay.